Weekly Market Update- Week Ending 17/11/2023

In the world of finance, Inflation was firmly on the agenda this week as investors keenly awaited the release of October’s data.

First up on Tuesday, we got the news that consumer price inflation (CPI) in the United States fell from 3.7% in September to 3.2% in October, and importantly, core inflation (which removes some of the more volatile elements like energy) fell to 4% in October from 4.1% in September. With inflation having peaked at a 40-year high of 9.1% in June last year, the aggressive moves in interest rates seen since appear to have turned the tide as CPI continues to trend lower towards the central bank target of 2%.

October was always going to be a big month for the UK, as the quarterly review of the energy price cap was captured by the data. This proved correct as inflation fell by over 2% during the month to 4.6%, having been 6.7% in September. In a busy week for the Prime Minister, the latest fall sees him meet his pledge to halve inflation by the end of the year, although critics question quite how influential his role was in the fall.

The upshot of the inflation data saw investors conclude that we have likely reached the end of the interest rate hiking cycle in the US and UK. Having previously signalled that a further rate rise could be on the cards at their December meeting, it now looks increasingly likely that the US Federal Reserve will instead choose to hold rates at the current level.

Equities and bonds reacted positively to the news, with real estate companies some of the best performers due to their earnings being highly sensitive to interest rates. At an index level in the US, both the S&P 500 and tech-heavy Nasdaq indexes saw their biggest one-day bounce since April on Tuesday. Closer to home, mid-cap stocks were bright as investors tentatively added exposure.

John Naylor, Chartered FCSI – Head of Investment Committee